Introduction to DeFi

The aim of cryptocurrency is to provide accessibility to payments and money, to anybody, wherever they are around the world. The Decentralized Finance (DeFi) or Open Finance movement steps that up a notch by providing a universal and accessible alternative to every financial-related service such as savings, lending, loans and many more, with the only technology required being an internet connection and/or a smartphone. The development of increasingly Avant Garde functionality has been enabled through smart contract enabled blockchains such as Ethereum that made this possible. When a certain condition is met, a program running on the blockchain can execute spontaneously. These programs are what are now known as “decentralized apps”, or DApps. Consider a “DApp” as an app built on decentralized technology as opposed to one compiled and controlled by a specific, centralized presence or organization.

An example of how a DApp operates would be to consider two individuals, unknown to one another, located on opposite ends of the globe. These two strangers can directly acquire an automated loan, without the need for the middleman, or the bank. These DApps are already in existence and in operation today. Other applications of DeFi DApps are stable coins (a type of cryptocurrency of which the value is fixed to USD or other currencies), earn interest on cryptocurrency, take out a loan or lend out money, swap assets, execute progressive investment strategies, or even go long or short on assets.